Russian banks and pension funds took advantage of a sell-off in the Russian bond market, sparked in recent months by fears of sanctions and the central bank's hint that the rate-cut cycle is almost over, central bank and market representatives said.
Russian government bonds, known as OFZs, came under selling pressure in April after the latest U.S sanctions against Moscow. When the selling intensified again in June, Russian market players stepped in, buying rouble bonds at attractive prices.
Foreigners' share in Russian OFZ bonds was at 34.5 percent, or 2.35 trillion roubles ($38 billion), as of April 1, days before the fresh US sanctions. That share fell to 27.6 percent as of June 29, according to the central bank.
An official at the Bank of Russia said local market participants, mostly non-state pension funds, were among the main buyers of OFZ bonds from foreigners who ditched the debt. "When prices of OFZ bonds fell, they became attractive for buying, and funds increased their holdings," said Kirill Pronin, head of collective investment department at the central bank, referring to non-state pension funds.
According to the central bank's chart in its report on market liquidity, banks bought OFZ bonds in June mostly at the finance ministry's weekly auctions. Russian collective investors, or pension funds, were the main buyers on the secondary market.
Yields in Russian bonds, which move in the opposite direction of their prices, jumped in April after the latest sanctions. Another sell-off wave took place in the middle of June when the Russian central bank said the possibility of further rate cuts has diminished.
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